Abstract

The purpose of this study is to analyze the Technical Efficiency (TE) of Islamic banks and conventional banks in Pakistan by using Data Envelopment Test (DEA). We also used TOBIT analysis to identify the determinants of efficiency in the banking industry. Twenty banks have been selected from the banking industry, from which ten banks are Islamic banks or banks which have Islamic branches, and ten banks are conventional banks. Panel data are used for the period 2007-2015. Overall, it is concluded that conventional banks are technically more efficient than Islamic banks. Accordingly, the censored TOBIT regression indicates that the ownership, liquidity, bank size, and capital adequacy ratios are the main determinants of overall TE for the banks

Keywords

DEA; TOBIT; Technical Efficiency; Bank Size; Islamic Banks; Conventional Banks.